US Economic Wrap

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Yet another strong US economic release - 

Initial jobless claims for the week ending February 25 came in at 190,000 (Prior 192K) with 4w moving average at 193K. Initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. Weekly Continuing Claims came in at 1.655 mln; Prior was revised to 1.660 mln from 1.654 mln. While continued claims are not a leading indicator, they provide confirming evidence of the direction of the U.S. economy.

Low levels of Initial claims show tightness in the labor market and therefore sticky wage-based inflation pressures.

Unit labor costs in the nonfarm business sector increased 3.2% in the fourth quarter of 2022, reflecting a 4.9% increase in hourly compensation and a 1.7% increase in productivity. Unit labor costs increased 6.3% over the last four quarters. Q4 productivity increased 1.7%, a 130 bps revision below the preliminary estimate of a 3.0% increase.

Tightness in the labor market alongside elevated unit labor cost fostered concerns of prolonged tightening. Coupled with EZ Core CPI accelerating to a fresh record high of 5.6% yoy, US Treasuries sold off. 2Y yields touched a high of 4.94% and 10Y yields touched a high of 4.09%. The 2x10 spread rose to - 85 bps from previous day - 91 bps. 

Later in the session, comments from FOMC member Raphael Bostic helped calm the market nerves or may be the market is loosing steam at such elevated levels. He said he remains firmly in the 25 bps camp for rate hike pace and says policy should begin to bite in the spring. He also said that he maintains the view the policy rate needs to rise to the 5.00%-5.25% range and remain at that level well into 2024.